Using Data to Channel-Optimize Marketing

Posted on by Richard H. Levey

Marketing isn’t taught by the mathematics departments within colleges and universities, but some day maybe it will be. Each day, marketers are more dependent on the numbers. Metrics and measurements talk to marketers, revealing secret insights into campaigns. For example, data analysis shows how channel optimization makes money.

The idea is pretty simple — determine the optimal (usually meaning most profitable) allocation of marketing resources across available channels. But the data feeding into channel optimization can be deceiving unless the process can be carried out to completion.

Consider a prospect who appears on a rented list. He looks like a potentially high-value customer for an outdoor-gear retailer, which sends him a catalog. Three days after the in-home date, he makes a purchase from the online store. Which business unit gets the credit for the sale, the catalog division or the web division?\

In this case, the catalog is the channel. The online store took the order, but the customer arrived there from another channel. Spurred by receiving the catalog, the customer entered the URL directly and then entered the item number in the search box to make his purchase.

Marketers need a detailed capture mechanism that collects this kind of hidden data in order to understand which channels are delivering the revenue. What follow are some guidelines to help with channel optimization:

1. Don’t let isolated slices of data throw analysis off. Statistics about individual channel results can be misleading if data isn’t evaluated through a prism of understanding the true costs, true response/purchase rates and calculation of the transaction value. Someone might say “Search engines are free.” Maybe, but search engine optimization is not: Marketing departments pay someone internally or externally to do it.

2. Build a database that will ensure the data is telling the whole story. Establish a data hierarchy that holds and maintains customers’ preferred channels. Then employ a suppression list to avoid over-communicating to the customer across multiple channels. Create a single source of truth for the data – “un-silo” the data from different divisions within the organization. Focus the analysis around the customer, not channel, product, or business unit. This approach will show how customers are being acquired and grown, and help determine which channel gets credit for it.

3. Zealously track costs and revenue by channel. It’s critical to know whether a new customer hits the site from a QR code in a magazine or from a refer-a-friend-campaign email link or from a paid banner ad. Each of these channel programs have a cost associated with them, and they each deliver revenue at a different rate.

4. Three letters: ROI. Plus two words: By channel. And don’t forget the lifetime value of a customer in ROI calculations. Often the campaign ROI is negative, particularly with pilot campaigns. That first purchase alone might not justify the cost to acquire the customer. Higher cost of acquisition may be justified only when considering the revenue generated over a broader timeframe – like first-year revenue, for example.

Channel optimization is just like the rest of marketing. If you can’t measure it, you can’t manage it.

Tim Altier is director of business analytics and insight, Bridgz Marketing Group

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